Broadcom Gets a Wrist Slap For Monopolizing Cable Box, Modem Markets

Legal Issues

from the do-not-pass-go,-do-not-collect-$200 dept

While most folks didn’t notice ahead of the holiday weekend, the FTC on Friday announced it would be giving chipmaker Broadcom a bit of a wrist slap after the agency found it had become an “illegal monopoly.” In the FTC’s complaint (pdf), the agency notes that Broadcom “illegally monopolized” both the cable modem/gateway and cable set top box markets by preventing its customers from buying products from other vendors. It did this by forcing both OEMs and service providers into long-term agreements that prevented them from purchasing chips from Broadcom’s competitors, then bullying them if they went off script:

“These agreements required customers to purchase, use or bid Broadcom?s chips on an exclusive or near-exclusive basis. Broadcom entered these exclusivity and loyalty agreements with at least ten OEMs, including those with the most extensive engineering and design capabilities and the strongest ties to service providers. And Broadcom entered similar agreements with major U.S. and other service providers. By entering exclusivity and loyalty agreements with key customers at two levels of the supply chain, Broadcom created insurmountable barriers for companies trying to compete with Broadcom.”

The charges follow similar accusations in Europe. As we’ve long noted, the cable set box market has long been a monopolized mess on several layers. One, on the way Broadcom controls chipsets. But also in the way that cable giants generate $21 billion annually forcing consumers to rent cable boxes that would be far cheaper to buy outright. Fortunately streaming has put a dent in at least some aspects of this problem, even though cable TV with a traditional set top box remains the dominant delivery avenue for television for now (Broadcom also provides chipsets for streaming hardware).

According to the FTC Broadcom won’t be seeing any financial penalty for its efforts to monopolize the modem and cable box chipset market, but a new FTC order (pdf) bans the company from doing so moving forward (for however long the FTC can bother to pay attention):

“Under the proposed consent order, Broadcom will be prohibited from entering into certain types of exclusivity or loyalty agreements with its customers for the supply of key chips for traditional broadcast set top boxes and DSL and fiber broadband internet devices. Broadcom also must stop conditioning access to or requiring favorable supply terms for these chips on customers committing to exclusivity or loyalty for the supply of related chips. And the proposed order prohibits Broadcom from retaliating against customers for doing business with Broadcom?s competitors.”

The 4-0-1 vote (new FTC boss Lina Khan did not participate) is just a small dent in a larger problem in both telecom, cable, and the shifting cable TV market. Namely the lack of overall competition in broadband (which opens the door to unnecessary usage caps and other dodgy efforts to hamstring streaming competitors), as well as persistent gatekeeper issues, like the ongoing practice of forcing consumers to shell out thousands in rental fees for crappy cable set top boxes and streaming hardware alike.

Filed Under: antitrust, cable modem, cable set top box, competition, ftc, monopoly